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Spokane, Washington  Est. May 19, 1883

Doris Nelson’s Little Loan Shoppe victims get compensation

The first repayments to investors who lost millions to fraudster Doris Nelson began trickling out last month, even as a court-appointed trustee continues to claw back money in legal battles with financiers.

Seattle attorney Bruce Kriegman, who is overseeing the account set up to repay hundreds of people who lost money by investing in Nelson’s Little Loan Shoppe payday loan scam, said the first checks were sent last month. The sum was about $3.6 million, a small portion of the amount prosecutors say was lost in the scheme that drew investors from all over the world and operated in Canada and Spokane for more than a decade.

“I think we’re making progress,” Kriegman said Wednesday.

Those checks arrive as Kriegman and other attorneys work to resolve the last few civil lawsuits against investors who made money on Nelson’s scam, and the former Colbert resident begins her nine-year stay in federal prison. Not everyone agrees that those who profited owe money to their bilked colleagues, complicating the legal process.

“This has been a fight, every step of the way,” said Rick Mount, an attorney with firm Witherspoon Kelley who is working with Kriegman on the case.

Kriegman’s main opposition has been investors representing themselves in court, including 82-year-old David Perry, who is phoning in to a Spokane federal courtroom this week from Sri Lanka. Perry put about $150,000 into the Little Loan Shoppe during its days of operation and received $220,000 in compensation, making him what the court calls a “net winner” in its classification of investors.

Perry argues he believed the Little Loan Shoppe was a legitimate business when he invested years ago. He also says Doris Nelson’s criminal sentence is based upon a finding by U.S. District Court Judge Robert Whaley that she operated a fraudulent company, not a Ponzi scheme. Under federal law, a trustee may “claw back” all the money generated by a Ponzi scheme. But a legal finding of fraud limits the amount that can be recovered.

“They are trying to obtain funds from me, when I do not have any,” Perry said in scratchy telephonic testimony in a Spokane federal courtroom Wednesday.

Though Whaley cast some doubt whether Nelson operated a Ponzi scheme, other federal judges ruled in bankruptcy and civil courts that the business met the Ponzi definition.

While Perry elected to represent himself in the proceedings, Seattle attorney Dillon Jackson represented several other investors, all of whom were sued by Kriegman in an effort to force them to surrender their earnings for redistribution among all who lost significant cash.

“With maybe a couple of exceptions, every one of these folks thought the business was legitimate,” Jackson said. In order to avoid having a judgment against them, a Ponzi scheme investor must prove to a judge or jury that they invested in good faith, believing that Nelson operated a successful business.

Perry’s case has been complicated by an email he sent in September 2007, about 15 months before Nelson’s businesses began to unravel. In that email to his two children, Perry states the investment opportunity in the business “seems too good to be true,” which attorneys say is evidence he realized he was putting money into a scam. Perry’s email also said, “But if it really is legitimate, and all the evidence so far is that it is, it is an opportunity of a lifetime.”

Jackson said Perry’s story is typical of the Little Loan Shoppe investors, who sunk their savings into a business that promised returns of up to 60 percent.

“Most of these people do not have the net worth to be investing like this,” Jackson said. “They were borrowing against their houses. These are mostly older people.”

Jackson also criticized Kriegman’s decision to go after all money transferred to the accounts of net winners, rather than just the profits.

“That’s why there’s been a fight,” Jackson said.

The repayment plan was adopted by the majority of investors who lost money, attorney Mount said Wednesday.

Perry’s case will be decided by U.S. District Court Chief Judge Rosanna M. Peterson, but a few other civil lawsuits are set to be heard by a jury later this year. Their legal fights will occur alongside Nelson’s, who continues to appeal her nine-year prison sentence after several failed attempts to rescind her guilty pleas on 110 criminal counts of fraud last year.

Jeffry Finer, Nelson’s attorney, said Tuesday that her appeal is in its early stages. The Bureau of Prisons confirmed Nelson is in transit to a detention facility; she is scheduled for release in September 2022.